Toyota Poised to Put Legal Troubles in Rear View Mirror

Ben Klayman and Casey Sullivan

Published 6:45 PM ET Thu, 27 Dec 2012
Reuters

David Paul Morris | Bloomberg | Getty Images

Toyota Motor eliminated a huge obstacle with a U.S. settlement over unintended acceleration in its cars and trucks, leaving it to fight smaller cases that will be harder for plaintiffs to prove and less likely to damage the company's growing sales.

While the Japanese automaker still faces possibly hundreds of personal injury lawsuits related to claims that its vehicles accelerated unintentionally, Wednesday's $1.1 billion settlement announcementwill remove the last big roadblock to putting the issue behind it.

Sean Kane, president of Safety Research & Strategies and an outspoken critic of Toyota who has assisted plaintiffs' attorneys against the automaker, said the settlement covered the biggest financial hit for Toyota.

"Those are not billion-dollar cases," he said of the pending personal-injury lawsuits. "Those are at best million-dollar cases or multimillion-dollar cases. With a company like Toyota, that's not even something that's a blip on their radar."

At the time, the recall around the unintended acceleration issue and resulting lawsuits were a surprise for a company long associated with quality and reliability, and the resulting fallout led President Akio Toyoda to apologize publicly.

Lee Kaplan, a product liability lawyer in Houston, said plaintiffs in the injury and death cases also will have an uphill battle in court because they will need to prove deficiencies in Toyota's equipment.

"I have never seen anyone identify the single cause of the problem," he said. "Without identifying a true scientific or technical basis, pinning a verdict on Toyota will be hard."

Toyota said it agreed to spend $1.1 billion to settle sweeping U.S. class-action litigation over claims millions of its vehicles accelerated unintentionally. The recall fallout related to the issue was a $2 billion hit to earnings in the company's 2010 fiscal year.

Judge James Selna is expected to review the settlement on Friday in U.S. District Court in Santa Ana, California. However, final approval and disbursement of the money may not occur for several months.

The proposed settlement will compensate customers for economic losses related to possible safety defects in Toyota vehicles, covering most of the litigation involving unintended acceleration.

Wrongful Death

About 16 million Toyota, Lexus and Scion vehicles sold in the United States spanning the model years 1998 to 2010 are covered by the settlement. Company officials have maintained the electronic throttle control system was not at fault, blaming ill-fitting floor mats and sticky gas pedals. A study by federal safety officials at the National Highway Traffic Safety Administration and NASA found no link between reports of unintended acceleration and Toyota's electronic throttle control system.

Toyota, the No. 3 automaker in the U.S. market, admitted no fault in proposing the settlement, one of the largest U.S. mass class-action litigations in the automotive sector. One plaintiff's law firm called it the largest settlement in U.S. history involving auto defects.

However, the deal does not cover wrongful death or injury lawsuits, which according to a June Toyota filing totaled more than 300.

Those cases will be handled by Toyota one by one, with the first slated to go to trial in February 2013 in Judge Selna's California court, involving a Utah crash that killed two people. However, one wrongful death case in Houston was dropped last year due to lack of evidence and the largest such lawsuit, over the death of the family of off-duty California Highway Patrol officer Mark Saylor, was settled out of court for $10 million in late 2010.

Sales Rebound

Toyota's recall of its vehicles between 2009 and 2011 relating to the unintended acceleration issue hurt its reputation for reliability and safety.

But the automaker's sales were up almost 29 percent in 2012 through November, compared with a 14-percent increase in the industry, and Toyota's share of the U.S. market has risen to 14.4 percent from 12.7 percent in 2011. Last year's Toyota sales were depressed by the March earthquake and tsunami in Japan.

The full effect of the acceleration issue on Toyota's U.S. sales may not be known for years, until the current owners affected by it need to buy another vehicle.

Yet with its U.S. sales rising at double the industry's rate and the company expected to reclaim the global sales crown this year, analysts said Toyota has seemingly shaken off any lingering damage to its reputation.